U.S.: March Employment Report is Solid, but Concerns Over Recession Mount
2025-04-08
■ The March U.S. employment report is strong, but concerns over recession have grown significantly following the announcement of reciprocal tariffs.
■ The Federal Reserve (Fed) faces a difficult situation. To resume interest rate cuts under high inflation, a deterioration in the labor market will become a key focus.
The March U.S. employment report showed strong results. Non-farm payrolls increased by 228,000, showing robust growth. Although employment numbers for January and February were revised downward, the 3-month average increase was 152,000, maintaining a stable growth rate close to the average of the past year. The unemployment rate rose slightly from 4.1% in February to 4.2%, but average hourly earnings rose by 0.3% month-over-month. Year-over-year growth slowed from 4.0% in February to 3.8%, indicating a favorable trend of moderate wage inflation easing. From this employment report, it is evident that the U.S. labor market remained healthy before the intensification of trade tensions.
However, following the announcement of reciprocal tariffs by the U.S. administration on April 2, the risk of a recession in the U.S. economy has emerged, depending on the future policies and negotiations. Currently, the U.S. economy reflects inflation concerns from tariffs, with a significant deterioration in consumer sentiment, and personal consumption may already be starting to be restrained. Furthermore, the risk of reduced business investment due to continued high uncertainty and a decline in exports caused by worsening trade tensions has increased. In such a scenario, companies will likely cut jobs to reduce costs, and the deterioration of the labor market will become apparent. According to models from the Organization for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF), U.S. GDP growth could be reduced by approximately 0.7% and 1.0%, respectively, due to a 10% tariff increase by the U.S. * If reciprocal tariffs are imposed, the average U.S. tariff rate is expected to rise from around 2% to approximately 20%, and the economic drag from tariffs could expand to between 1.5% and 2%. If such shocks persist, negative growth and recession may become a reality.
However, for the Federal Reserve (Fed), it remains a challenging situation. The direct impact of tariff hikes on the price of imported goods will likely be passed on to consumer prices quickly, but the global supply constraints' impact will take time to spread. Fed Chairman Powell emphasized the risks of high inflation and economic slowdown due to tariffs in his speech on April 4. However, he cautioned that it was too early to draw conclusions on the appropriate direction for monetary policy, adopting a cautious stance toward preventive interest rate cuts. Even in the face of rising inflation, interest rate cuts are expected to focus on the deterioration of the labor market and increasing stress in the funding markets. Employment reports will remain a key focus in the coming months.
■ The Federal Reserve (Fed) faces a difficult situation. To resume interest rate cuts under high inflation, a deterioration in the labor market will become a key focus.
The March U.S. employment report showed strong results. Non-farm payrolls increased by 228,000, showing robust growth. Although employment numbers for January and February were revised downward, the 3-month average increase was 152,000, maintaining a stable growth rate close to the average of the past year. The unemployment rate rose slightly from 4.1% in February to 4.2%, but average hourly earnings rose by 0.3% month-over-month. Year-over-year growth slowed from 4.0% in February to 3.8%, indicating a favorable trend of moderate wage inflation easing. From this employment report, it is evident that the U.S. labor market remained healthy before the intensification of trade tensions.
However, following the announcement of reciprocal tariffs by the U.S. administration on April 2, the risk of a recession in the U.S. economy has emerged, depending on the future policies and negotiations. Currently, the U.S. economy reflects inflation concerns from tariffs, with a significant deterioration in consumer sentiment, and personal consumption may already be starting to be restrained. Furthermore, the risk of reduced business investment due to continued high uncertainty and a decline in exports caused by worsening trade tensions has increased. In such a scenario, companies will likely cut jobs to reduce costs, and the deterioration of the labor market will become apparent. According to models from the Organization for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF), U.S. GDP growth could be reduced by approximately 0.7% and 1.0%, respectively, due to a 10% tariff increase by the U.S. * If reciprocal tariffs are imposed, the average U.S. tariff rate is expected to rise from around 2% to approximately 20%, and the economic drag from tariffs could expand to between 1.5% and 2%. If such shocks persist, negative growth and recession may become a reality.
However, for the Federal Reserve (Fed), it remains a challenging situation. The direct impact of tariff hikes on the price of imported goods will likely be passed on to consumer prices quickly, but the global supply constraints' impact will take time to spread. Fed Chairman Powell emphasized the risks of high inflation and economic slowdown due to tariffs in his speech on April 4. However, he cautioned that it was too early to draw conclusions on the appropriate direction for monetary policy, adopting a cautious stance toward preventive interest rate cuts. Even in the face of rising inflation, interest rate cuts are expected to focus on the deterioration of the labor market and increasing stress in the funding markets. Employment reports will remain a key focus in the coming months.